1. Strength. Performance. Passion.
Know your Modular Mining Costs for Negotiating
with 3rd parties
Holcim (Azerbaijan) OJSC
© 2015 Holcim Technology Ltd. June 2015
Holcim Mining
Community
Name
Ivan Pjanić / Quarry
Manager, Holcim
(Azerbaijan) OJSC
Team member names:
Caludiu Chendes / Head of
Raw Material Europe, RSO
EE
Editor: G. Reichholf
Benefits
Operating costs
• € 115k saved so far
• Yearly savings estimated
at € 251k
OH&S
• Improved traffic safety
Lessons learned
• Knowing each modular
mining cost is key for
negotiating with 3rd
parties
• This insight is a major
criteria for deciding which
operation to outsource
Links
Report CM.14.82083
Subject
In early August 2014, a team of specialists, which included all organizational
levels of Holcim (Corporate, Regional and Local) as well as providers (Volvo
and Michelin), performed a Site Assessment (SA) at the Garadagh plant (GD).
The focus was on Mobile Fleet Management, the 2nd pillar of the drill to mill
initiative (dmi). This pillar influences costs on different areas: investments for
replacing equipment (CapEx) and operating costs (OpEx). The team analyzed
the performance of the Limestone and Clay quarries, which were then entirely
subcontracted (to find out more consult the attached report, CM.14.82083.
REP.1).
The timing of the SA could not be better as the contract for the clay quarry was
expiring at the end of August. The first calculations showed that in-sourcing
that quarry would reduce costs. The plant management decided to put these
results to the test and did not renew the contract. Instead, the quarry
department tried out fully in-sourced operations of the clay over the two
following months to assess the technical and financial feasibility of the
recommendations.
Achievements
The quarry department implemented three major changes during the trial
period:
1. Process the clay in the primary crusher used for limestone, since this
equipment could handle it. This increases the hauling distance by 6 km for
each round trip. Alternatives are currently under study to reduce that distance
and cut down costs even further.
2. Improve the haulage roads (surface and geometry) and implement a routine
for their maintenance. The works cost around € 5’000. This increased both the
traffic safety and the average hauling speed.
3. Collect, consolidate and analyze production data to determine each modular
mining cost (loading, hauling, and crushing) for negotiating a new contract.
Based on the results of the test, the plant only outsourced the hauling activity.
This avoided buying trucks, which also kept associated investments and fixed
costs low. This new contract runs until the end of 2015, after which it can be
renegotiated.

2. Strength. Performance. Passion.
© 2015 Holcim Technology Ltd. June 2015
Getting a tonne of clay costs now € 1.38, 42% less than before the SA: the project has accrued savings of
€ 115'000 so far. Each year the plant needs 250’000 t of clay: this project can cut operating costs by €
250’000 per year for almost no investment.
Activity Cost before SA (€ / t) Cost after SA ( € / t) Remark
Loading(1)
3rd
party performed
all activities
0.09 done by Holcim
Hauling 1.19 done by 3rd
party
Crushing 0.10 done by Holcim
TOTAL 2.38 1.38 Saving: - 42 %
Table 1: Cost(2)
comparison before and after the Site Assessment
(1)
Holcim was lending a loading machine to its 3rd party: no investment was required for the project.
(2)
Calculations were originally made in Azerbaijani Manat (AZN), AZN 1 = € 0.85 (June 2015)